DBRS Ratings Limited (DBRS Morningstar) confirmed its BBB (low) and CCC (sf) ratings of the Class A and Class B notes, respectively, issued by BCC NPLs 2018-2 S.r.l. (the issuer).
The notes were backed by a EUR 2 million portfolio by gross book value (GBV) consisting of unsecured and secured nonperforming loans originated by a pool of 73 Italian banks.
The majority of loans in the portfolio defaulted between 2013 and 2018 and are in various stages of resolution. The receivables are serviced by Italfondiario S.p.A. (Italfondiario, now doValue, or the servicer). A backup servicer, Securitisation Services S.p.A., was also appointed and will act as a servicer in case of termination of the appointment of Italfondiario.
According to the most-recent investor report issued in June 2019, the principal amount outstanding of the Class A, Class B, and Class J notes was equal to EUR 464.6 million, EUR 60.1 million, and EUR 20.0 million, respectively.
The actual cumulative gross collections after closing was equal to EUR 30.9 million, as of June 2019. The initial business plan provided by the servicer assumed total gross collections for EUR 23.4 million during the same period, which is 24% lower than the amount collected so far.
At issuance, DBRS Morningstar estimated gross disposition proceeds for the same period of EUR 21.7 million in the BBB (low) scenario, which is 30% lower than the actual cumulative gross collections.
As reported in the semiannual servicer report from June 2019, the net present value cumulative profitability ratio and the cumulative collection ratio are respectively 100% and 126%. A subordination event would occur if the one of the ratios drops below 80%.
The transaction benefits from an EUR 14.3 million amortising cash reserve, which was funded with a limited recourse loan. The cash reserve has a target balance equal to 3% of the Class A Notes outstanding balance. The cash reserve is available to cover senior fees and expenses as well as interest due on the Class A Notes. As per the latest investor report as of June 2019, the cash reserve totalled EUR 14.3 million.
DBRS Morningstar based its ratings on an analysis of the projected recoveries of the underlying collateral, the historical performance, and expertise of the servicer as well as the transaction’s legal and structural features.
The transaction’s final maturity date is in July 2042.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology”.
DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include doValue and its agents. DBRS Morningstar did not rely upon third-party due diligence to conduct its analysis.
At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings were of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.
This is the first rating action since the Initial Rating Date.
Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies are available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- DBRS Morningstar concludes that a hypothetical decrease of the recovery rate by 5%, ceteris paribus, would lead to a downgrade of the Class A notes to BB (sf).
-- DBRS Morningstar concludes that a hypothetical decrease of the recovery rate by 10%, ceteris paribus, would lead to a downgrade of the Class A notes to B (high) (sf).
-- DBRS Morningstar concludes that a hypothetical decrease of the recovery rate by 5%, ceteris paribus, would lead to a confirmation of the Class B notes at CCC (sf).
-- DBRS Morningstar concludes that a hypothetical decrease of the recovery rate by 10%, ceteris paribus, would lead to a confirmation of the Class B notes at CCC (sf).
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
The lead analyst responsibilities for this transaction have been transferred to Manon Naegels.
Lead Analyst: Manon Naegels, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 20 December 2018
DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Rating European Non-Performing Loans Securitisations
-- Master European Structured Finance Surveillance Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- European CMBS Rating and Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at firstname.lastname@example.org.